Response To A Thought-Provoking Tweetstorm

A stranger (hopefully a future friend, Pietro Invernizzi) on Twitter tagged me as part of his tweetstorm earlier today about his hope for how VCs and founders should interact around and during a pitch. It was a longer tweetstorm, and I felt it would be more effective for me to respond in longer-form, so I’m reproducing it here with my commentary:

0/ Thread: 10 things early stage VC investors could do better 🐺… based on recent articles and tweets by @willmcq @briannekimmel @HarryStebbings @fredwilson @eamonncarey @2lr @micahjay1 @StartupLJackson @chrija @semil

Ok, I’m ready…

1/ If you say too early, mean it. Telling founders it’s ‘too early’ is an easy rejection: it can always apply | it’s not about the team | it can’t be used to prove you wrong later. Still, if you brand yourself as early stage VC, why not give real reasons?

There’s nuance here. It depends how one views “early-stage.” There are folks who truly consider themselves as early-stage investors and want to be the first check in whereas others who claim the same moniker need some “meat on the bones” before looking at a deal. But, yes, always a good idea for both sides to be candid in discussions.

2/ Relatedly, put all your efforts into writing nice, honest & detailed rejection emails. It can make you look great, regardless of how painful the content may be. Who knows; the rejected founder may even recommend you to other great founders thanks to it

No one wants to keep writing emails all day. Some folks may want to call. I’ll often say “no” in the meeting. If I spend a lot time on something, I will call back and chat live. At the earlier stages this is just operationally hard because of the amount of new companies being formed.

3/ Understand that – during fundraising – a founder’s time is more valuable than yours (opportunity cost: building their company). Unless you can’t do otherwise, be quick: don’t take one month to meet a founder. And offer to meet at their office, not yours

I reject the premise here. My time is valuable, too. I have to raise money, too. I may also need time to think something over. If folks ever want super fast answers where I haven’t thought it through, I just say “no.”

4/ When looking at potential investments, be open to alternatives to pitch decks. Even if decks are efficient at telling a startup’s idea, there’s plenty of more formats that may do the founder(s) more justice. Don’t ignore videos & creative applications …

Why? What matters most is the introduction and recommendation. What if the video is too long? What if the pitch isn’t clear? I think videos and creative elements can be used effectively *alongside* simple but formal pitch materials — which signals a seriousness about one’s intent.

5/ Encourage founders to do their due diligence on you and on future investors. Be as transparent as you can on your past and make it as easy as possible for founders to interact with people you previously invested in

Most investors I know do this. Do founders actually do this? I don’t know, but I don’t see why the burden is on the investors. This seems to be widely known as good practice.

6/ Be good at addressing concerns. It’s hard to perfectly express something we believe is wrong and should be taken into account by the founder(s) involved. However, firmly and empathetically acting towards the right pace of change can have a great impact

Agree, candor should prevail as much as possible.

7/ Acknowledge that – while your fund’s economics may require billion dollar valuations – your portfolio startups’ may not. Don’t drive irrational behaviour in fundraising, spending or selling unless it really is in a company’s best interest

Most investors I know do not do this. Often, I see a desire to chase valuations stemming from founders, too.

8/ Celebrate the success of startups in your portfolio, but never take credit for it. In most cases, there’s too many factors that contributed to a victory for you to be seen a a big one. And if you indeed contributed, let founders speak for you

Honestly, I don’t see this often. Most investors I know remark they’re just lucky to be involved in certain companies.

9/ Take steps to decrease founders’ uncertainty of whether existing investors will participate in the next round (and the associated signaling issues). For instance, promise to always do your pro-rata in future rounds provided they are ‘legitimate’ rounds

This seems unrealistic given how partnerships work and how many early rounds a company can raise. It’s a risk the founder has to manage as part of his/her job. Ultimately, it’s an amazing environment for people to raise money — there are 500+ funds that are designed to just give away money!

10/ Always have a holistic view on what’s happening in terms of dealflow. Based on this, be good at doing nothing when there is nothing to be done. E.g. don’t force deals if no attractive ones come up. Think long term. Hold. It’s harder than it seems /end

Will do, Pietro! Thanks for sharing and hopefully this helps share another POV on your storm.